Good morning
Headline US nonfarm payroll number came in at +315k, just above estimates, although the unemployment rate was a touch higher than expected and the average hourly earnings was down a little. The US dollar didn’t run sharply higher initially but it did begin to strengthen into the london close and that strength continued in Asian markets overnight, EURUSD now down to 0.9890 and GBPUSD all the way down to 1.1445, within a whisker of the lows seen in March 2020. Both are a little off those lows but if anything GBP feels the more vulnerable right now. Even the growing potential for a 75bps rate rise later this month isn’t helping GBP. GBPEUR for the record is 1.1570, pretty much the middle of the range we have so far in September.
The next Tory party leader will be announced just after midday today. Truss is odds on favourite, Sunak is now out to 55-1 so the result would seem to be a foregone conclusion. A lightly strange choice of leader for me. I always look at someone and imagine how they would appear if standing next to a host of other world leaders. Not sure Truss will command the immediate respect that others will, nor do I think she is an improvement on the outgoing PM. There are plenty of examples of embarrassing policies, speeches and interviews, but perhaps if you look closely enough you’d find something similar on anyone. Sunak pretending to be a football fan was one of his most recent gaffes. I’ve seen nothing reassuring though.
High energy prices remain in the headlines, quite rightly too. We know our domestic bills are rising significantly but there is now more and more comment on the cost of high furl to business, whether a pub or restaurant fuel bill, or a factory, there is talk of either being closed as prices surge higher. Truss claims she’ll have a policy in place within days to help but this is obviously likely to be either too little or too expensive. Germany meanwhile have hit their target of 85% of their gas storage capacity, good going given the NordStream pipeline remains shut.
RBA rate announcement comes in the early hours of tomorrow morning. A 50bps rise from 1.85% to 2.35% looks most likely, whether this is enough to offer a great deal of support to AUD depends very much on the accompanying statement. It is clear RBA want to raise rates, it is also clear they have concerns over employment. With markets pricing in a rate of 3% or so by year end, a move to 2.35% or even higher still shouldn’t send AUD flying.
US markets are closed today which usually leads to a relatively quiet session. Something tells me we won’t be relaxing this afternoon.
- 09.00 EU S&P composite PMI
- 09.30 UK S&P composite PMI
- 10.00 EU retail sales
- 12.30 UK conservative leader named
- 16.30 BoEs Mann speaks
- 00.01 UK BRC retail sales
- 00.30 Japan household spending
- 05.30 RBA rate announcement
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